A recent ruling by the Court of Cassation in Abu Dhabi, United Arab Emirates (UAE) marks a significant shift in the interpretation and enforcement of UAE labor law concerning unused annual leave entitlements. The court ordered an employer to compensate a former employee for 13 years of unused leave, totaling Dh59,000, establishing a critical precedent in employment disputes related to leave balances.
Case Study: Unused Annual Leave Dispute in UAE Employment Law
The dispute arose from an employee who served a single company from 2009 until the termination of his contract in June 2022. After leaving, the employee claimed he had never taken his entitled annual leave throughout his 13 years of service and sought financial compensation for this accrued entitlement.
According to legal counsel from Habib Al Mulla and Partners, a prominent Emirates law firm, the employer failed to provide documentation to counter the employee's claim or demonstrate that the leave had been taken or compensated.
UAE Court of Cassation Ruling on Unused Annual Leave Compensation
Initially, in case number 2024/73, a lower court sided with the employee but capped the compensation to two years of unused leave. This limitation was based on Article 29 of Federal Decree-Law No. 33 of 2021 and Cabinet Resolution No. 1 of 2022, which allows compensation for unused leave upon contract termination, including a limited portion of leave carried forward from previous years.
However, the Court of Cassation overturned this decision, granting full compensation for the entire 13-year period. The court underscored the employer's responsibility to provide evidence that the employee had taken leave or was paid in lieu thereof. The employer's internal records revealed only one vacation during the decade-long tenure and no evidence of payments for unused leave. Consequently, the court ruled in favor of the employee, calculating owed compensation based on the final basic salary.
Key Takeaways for Employers on Annual Leave Compliance
This ruling sends a clear and urgent message to UAE employers regarding the critical importance of maintaining accurate and thorough leave records. The judgment highlights that proper leave tracking and timely settlement of entitlements are not only best practices but essential legal obligations.
HR departments and company leadership are urged to:
Ensure robust documentation of all employee leave taken.
Regularly reconcile leave balances and communicate them transparently to employees.
Settle any outstanding leave entitlements promptly at contract termination to avoid costly litigation.
Review and update leave policies to align with recent legal interpretations.
How UAE Employers Can Ensure Compliance with Leave Laws
This landmark decision sets a new standard for how unused leave claims are treated under UAE law. For global companies operating in the UAE or managing UAE-based teams, it reinforces the importance of compliance and proactive workforce management.
Atlas HXM's global employment expertise can help businesses navigate such evolving legal landscapes with confidence. We offer robust HR and compliance support to ensure your workforce management practices meet local requirements, protecting your business and empowering your employees.